“What’s the difference between Account Management and Customer Success? And more importantly, when do I need separate AM and CS teams?”
I’ve been asked this question multiple times in the last few months so it’s clear that many people are grappling with this problem. The short answer - it depends. Specifically, it depends upon your product, your P&L and your customers.
What’s the difference?
Most people know that Accounts Managers are different to Customer Success Managers. But what precisely is the difference? It lies in the relationship they have with the customer.
Account Managers typically have responsibility for the “business” relationship with the customer. They need to make sure the customer is satisfied, is actually getting value from the product and is ultimately responsible for renewing and cross-selling/expanding. In order to do this, the AM needs to understand the strategy, the business goals and the pain points of the customer. Successful AMs typically have experience in carrying a quota, and their compensation has a large variable component, typically tied to quota attainment.
Customer Success Managers have the “product” relationship with the customer. This means they work with the customer to ensure that they are using the product and getting value from it. To do this, they take the strategy, business goals and pain points of the customer and identify how the product can help. They typically have customer-facing experience, do not carry a quota and only have a small amount of variable compensation.
Example: Acme Inc, a company that sells a SaaS payroll solution, just signed on a new customer, Growth Inc, a fast growing tech company. The Account Manager’s responsibility is to discover/know that Growth Inc purchased the solution because they are growing, that Growth Inc doesn’t have an HR administrator and they are looking to secure Series B funding in the next 6-12 months. The Customer Success Manager is responsible for configuring the platform to make sure that it’s easy to add new employees (because of the growth), the self-service feature is turned on (because there is not HR administrator) and that the management team receives a report on a weekly basis that has metrics that can be easily plugged into a financial model (for the Series B funding discussions).
Single team? Or separate Account Management and Customer Success teams?
There are at least 3 factors that help determine whether you have a single, mixed-function team or two separate teams.
i) Product complexity
The more complicated the product is to implement and use, the more likely you will need separate teams because it is generally too difficult for someone to have technical and sales expertise. In addition, when the implementation is difficult, the client needs to feel like someone is ‘on their side’, and that can’t be the same person who is going to ask for more money. On the other hand, if the product is relatively simple and does not require a lot of technical hand holding, it is possible for that to be handled by a single person.
ii) Profit & Loss
Your P&L may ultimately dictate whether you can afford separate teams, or whether just one is the only economically feasible option. One way to determine this is to look at the CAC:CRC ratio (Cost of Acquisition to Cost of Retention). If your CAC is generally running at the right level (i.e. LTV:CAC is around 3), then your CAC:CRC should be around 3-5 i.e. it should ⅓ - ⅕ of the cost to retain a customer than it is to acquire a new customer. With that understanding, it is relatively easy to see how much your organization can spend in total to retain customers.
Example ACME Ltd has a LTV:CAC of 3, and the CAC is $700. Therefore, the CAC:CRC should be $129/mth/customer (i.e. $700/5). If the number of customers is 1,400, that means the Client Success team should cost no more than $181,250/mth. Knowing this budget needs to pay for tools and fully-loaded headcount, you can play around with different structures to see which one fits with the customer best while fitting with the P&L.
As your customer base continues to grow, you may consider having different structures for different tiers of customers. For example, your Tier 1 and Tier 2 spend enough that the P&L allows for a split team. For your Tier 3 and 4 customers, the economics dictate that the teams must be combined. And for Tier 5 customers (your lowest spending customers), a self-service model might be the only one that is financially feasible.
iii) Customer Feedback
One thing that is easy to overlook is customer expectations. If you have a process for capturing feedback, it’s likely they are telling you what they want. Look for signals like:
Deciding on whether to have a single team or separate teams can be a difficult decision, especially when there is no definitive answer. But the principles above should help in navigating the decision.
To discuss this topic more, or other Customer Success topics, please contact Azim Nagree at azim@nagreeconsulting
Azim Nagree is an ex-Bain consultant with 20+ years in leading strategy, growth and operations transformations.